Disruptive technologies, and disruptive practices, can cause good managers to fail. James A. Highsmith explains why a new management model is imperative and characterizes the market ecosystem in which software development teams must operate.

This chapter is from the book

On the desk in my office sits an entirely self-contained, enclosed, living ecosystem. Five inches high, this microcosm of life contains algae, very small shrimp and snails, and multitudes of microscopic bacteria, all living by exchanging stuff with each other and by converting light to biochemical energy. Next to this living ecosystem, on my computer monitor, digital beings (Biots) exchange digital stuff. They live, eat (each other, of course), mate, give birth, evolve into new organisms, and die—a sea of artificial life created in silicon by one of the many Artificial Life programs available.

I use these two visions of life, one real and one simulated, as constant reminders to myself to think about all business organizations as if they were organic ecosystems. Thinking of a feature team, a larger product team, or an entire company as an ecosystem helps me to understand how limited one’s actions are to influence the forces that propel the economic landscape. When thinking about how to manage in complex situations, I find that the concept of a living ecosystem provides a profound cultural perspective.

Biologists can’t predict what will happen when an exotic species is introduced into an ecosystem; neither can business organizations. Other species will react to the exotic in innumerable ways, some with short-term impact, others with long-term—for example, early European settlers introduced rabbits to New Zealand as a food source but, with no indigenous predators, they have now become so abundant as to be a scourge to farmers. An ecosystem suggests the presence of living things and their interaction. Market share, financial analysis, data warehouse—all bring to mind things without life. Animate or inanimate, each demands a different perspective. To think intelligently about a biological ecosystem or a business system, one must have a solid understanding of adaptation and evolution—one must focus on the dynamic rather than the static.

A scientific phenomenon in which an ecosystem experiences dynamic or sudden change (caused by an outside force) is called a “punctuated equilibrium.” As in the case of an outside force’s effect on the dinosaurs, some species adapt, others don’t. There is a similar concept in business, most commonly found in high-technology businesses, called “disruptive technology.” Like punctuated equilibrium in biological ecosystems, disruptive technologies allow some firms to prosper while causing others to die. Disruptive technologies change markets in ways that leave existing management strategies ineffective. Disruptive technologies cause even good managers to fail.

Disruptive Technologies

Our assumption that effective managers deliver successful products and ineffective managers cause projects to fail is wrong. Clayton Christensen paints a different picture of management success and failure in The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Christensen97). Christensen identifies two types of technologies—sustaining and disruptive—the second of which alters the basis of competition.

Changes in sustaining technology can be significant, but the criterion that separates sustaining from disruptive technologies is the impact sustaining technology has on business value. Sustaining-technology changes provide the customer with better, cheaper, faster versions of the same product. Disruptive technologies offer a new product with a different value proposition. For example, a technology that increased the capacity of an 8-inch disk drive would be a sustaining technology—same product, greater capacity. A 5¼-inch disk drive (smaller, less capacity, higher price) offers a new value proposition—smaller size. However, and this is a critical point, the new proposition (size) may only be of value in a new market. If the PC market had fizzled, and the mini-computer market had continued to grow, the smaller-size disk drive might not have been disruptive at all because it would never have gained enough market share to “disrupt” the 8-inch drive market.

Firmly established in the new market for PC disk drives, the smaller drives’ performance curve increased more sharply than that of the larger drives. Once the performance of the 5¼-inch drives began exceeding that of the 8-inch drives—smaller and better performance—the 8-inch drive market shriveled quickly.

Likewise, disruptive management practices are only relevant when the environment changes sufficiently such that traditional practices no longer produce the necessary level of success. For example, the impetus to use adaptive management practices will come only in environments in which speed and change cause optimizing practice to become ineffective.

In studying the history of companies in the disk-drive industry during the years between 1976 and 1996, Christensen found that in every case, without exception, established firms led the market in introducing sustaining technologies while new entrants dominated the marketplace in disruptive technologies (that is, by changing the disk-drive size). In reality, two years after the first 5¼-inch drives were introduced, 80 percent of the manufacturers were entrant firms—few of the 8-inch-drive makers survived the transition to the new 5¼-inch market. And, while established firms who were latecomers to major sustaining technology initiatives (such as thin-film drive heads) didn’t suffer revenue problems, the difference between late versus leading entrants into 5¼-inch drive disruptive technology was an average of $65 million versus $1.9 billion in revenue (Christensen97)!

The most thought-provoking of Christensen’s conclusions is that ineffective management was not the cause of failure. By every traditional measure of a good manager—that is, ones who listen to customers, pursue higher-margin business, invest prudently in manufacturing capacity, and generate lofty financial returns—good managers were the ones that failed. Competitor’s attacks from below (that is, from lower-cost, fewer-feature products) were not seen as threats until it was too late.

Just as 5¼-inch drives replaced 8-inch ones, personal computers ousted mini-computers, and hand-held calculators replaced slide rules, disruptive management practices such as Adaptive Software Development, in my opinion, will replace more traditional sustaining practices. Management practices in high-tech firms are different from those in more traditional industries. They are different because high-tech firms respond to the marketplace with what works—and what works in fast, uncertain, changing conditions is different from what works in slower, more certain, relatively stable ones.

Understanding why even good managers fail provides a context from which to view the next four chapters. We have seen, in Chapters 3 through 6, the Adaptive Development Model Life Cycle and the components of Speculate, Collaborate, and Learn. This chapter, and the three following, develop the concept of the Adaptive Management Model, specifically, the transition from a Command-Control view of management to a Leadership-Collaboration approach. The balance of this chapter describes why a new management model is imperative and characterizes the market ecosystem in which software development teams must operate. Chapter 8 describes adaptive management in more detail, in particular its culture. Chapters 9 and 10 then explain techniques for scaling adaptive development to larger projects.